4/28/2015

FactSheetonObamaAdministrationAutoRestructuringInitiativeforGeneralMotors|TheWhiteHouse

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ObamaAdministrationAutoRestructuringInitiative
GeneralMotorsRestructuring
OnMarch30,2009,PresidentObamalaidoutaframeworkforGeneralMotorstoachieveviabilitythatrequired
theCompanytoreworkitsbusinessplan,accelerateitsoperationalrestructuringandmakefargreaterreductions
initsoutstandingliabilities.Aftertwomonthsofsignificantmanagementengagement,GeneralMotorshas
developedsuchaplanandhasalreadybeguntomakeprogresstowarditsachievement.TheCompanyhasalso
securedcommitmentsofmeaningfulsacrificefromallofitsmajorstakeholdergroups,sacrificessufficientforthis
plantoproceedforward.Asaresult,thePresidenthasdeemedGMsplanviableandwillbemakingavailable
about$30billionofadditionalfederalassistancetosupportGMsrestructuringplan.Toeffectuateitsplan,
GeneralMotorswilluseSection363ofthebankruptcycodetoclearawaytheremainingimpedimentstoits
successfulrelaunch.

Forthebetterpartofacentury,TheGeneralMotorsCorporationhasbeenoneofthemostrecognizableand
largestbusinessesintheworld.Todaywillrankasanotherhistoricdayforthecompanytheendofanold
GeneralMotors,andthebeginningofanewone.
GeneralMotorsRestructuringSharedSacrifice
ThePresidentmadeclearthroughoutthisprocessthateveryoneoftheCompanysstakeholderwould
beexpectedtosacrifice,andthatnonewouldreceivespecialtreatmentbecauseoftheinvolvementof
thegovernment.Theresultingagreementistoughbutfair,andhasgarneredbroadsupportfromGMsmajor
stakeholders:
Operationalrestructuring:GMisundertakingasignificantoperationalrestructuringthatwill
addresspastfailures,dramaticallyimproveitsoverallcoststructure,andallowthecompanyto
movetowardprofitabilityeveniftheautomarketrecoversslowly.Asaresultofthisrestructuring,
GMwillloweritsbreakevenpointtoa10millionannualcarsalesenvironment.Beforethe
restructuring,GMsbreakevenpointwasinexcessof16millionannualcarsales.
TheUAWhasmadeimportantconcessionsoncompensationandretireehealthcarethat,whiledifficult,willhelp
savejobsforactiveemployees,pensionsandhealthcareforretirees,andmakeGMmorecompetitive.Invirtually
everyrespect,theconcessionsthattheUAWagreedtoaremoreaggressivethanwhattheBushAdministration
originallydemandedinitsloanagreementwithGM.Amongotherthings,theUAWsexistingVEBAtowhichGM
hasa$20bnobligationwillbereplacedbyanewVEBAasdescribedbelow.
TheSteeringCommitteetoaportionofGMbondholdershasconfirmedthatbondholdersrepresentingatleast
54%ofGMsunsecuredbondshaveagreedtoexchangetheirportionoftheCompanys$27.1billionunsecured
debtfortheirproratashareof10%oftheequityofnewGM,pluswarrantsforanadditional15%ofthenew
Company.TheSteeringCommitteeconfirmsthatthenumberofindividualandinstitutionalbondholdersthat
supportthisdealisnowover1,000.Thebankruptcycourtprocesswillbeusedtoconfirmthistreatmentforthose

L AT E ST BL OG P OST S
April27,20158:11PMEDT

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GeneralLorettaLynch
PresidentObamameetswiththenewAttorney
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BaltimorefollowingthedeathofFreddieGray.
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bondholdersandotherunsecuredcreditorsthatfailedtoacceptordidnotparticipateintheofferthatwas
acceptedbytheaforementionedmajority.
Painfulbutnecessaryrestructuringstepswillalsobeimplemented.InordertosizeGMsfootprinttoitscurrent

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sharebutalsoallowforvolumegrowthwhentheeconomyandtheautomotivemarketrebound,GMhasplanned
toreduceitsplantoperations.TodayGMisannouncingitsintentiontoclose11facilitiesandidleanother3

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DetailsontheCreationofNewGM:

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ThenewlyorganizedGMwillpurchasesubstantiallyalloftheassetsoftheoldGMneededtoimplementits
businessplanoutofachapter11inexchangefortheU.S.Governmentrelinquishingthemajorityofitsloansto
GM.
ThisnewGMwillestablishanindependenttrust(VEBA)thatwillprovidehealthcarebenefitsforGMsretirees.
TheVEBAwillbefundedbyanoteof$2.5billionpayableinthreeinstallmentsendingin2017and$6.5billionin
9%perpetualpreferredstock.TheVEBAwillalsoreceive17.5%oftheequityofNewGMandwarrantsto
purchaseanadditional2.5%ofthecompany.TheVEBAwillhavetherighttoselectoneindependentdirectorand
willhavenorighttovoteitssharesorthergovernancerights.

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FactSheetonObamaAdministrationAutoRestructuringInitiativeforGeneralMotors|TheWhiteHouse

TheGMqualifiedpensionplansforbothhourlyandsalariedemployeeswillbetransferredtotheNewGMas
partofthepurchaseprocess.
TheU.S.Treasuryispreparedtoprovideapproximately$30.1billionoffinancingtosupportGMthroughan
expeditedchapter11proceedingandtransitionthenewGMthroughitsrestructuringplan.TheU.S.Treasury
doesnotanticipateprovidinganyadditionalassistancetoGMbeyondthiscommitment.Inexchangeforfunds
alreadycommittedbytheU.S.Treasuryandthenewinjectionof$30.1billion,theU.S.governmentwillreceive
approximately$8.8billionindebtandpreferredstockinthenewGMandapproximately60%oftheequityofthe
newGM.TheU.S.Treasurywillalsohavetherighttoappointtheinitialdirectorsotherthanthosethatwillbe
selectedbytheVEBAandtheCanadiangovernment.
TheGovernmentsofCanadaandOntariowillparticipatealongsidetheU.S.Treasurybylending$9.5billionto
GMandNewGM.TheCanadianandOntariogovernmentswillreceiveapproximately$1.7billionindebtand
preferredstock,andapproximately12%oftheequityofthenewGM.Basedonitssubstantialfinancial
contribution,theCanadiangovernmentwillalsohavetherighttoselectoneinitialdirector.
Basedonthesesteps,thenewGMwillhavefarlessdebtandaworldclassbalancesheet.Thiswillallowthe
companythefinancialstabilitytoweatherfuturemarketdownturnsandgeneratesignificantexcessfreecashflow
toinvestinthebusiness.
ThenewGMwillalsopursueacommitmenttobuildanewsmallcarinanidledUAWfactory,whichwhenin
placewillincreasetheshareofU.S.productionforU.S.salefromitscurrentlevelofabout66%toover70%.
PrinciplesforManagingOwnershipStake
Consistentwiththegoalofclearlylimitingthegovernmentsroleasareluctantequityownerbutcarefulstewardof
taxpayerresources,theObamaAdministrationhasestablishedfourcoreprinciplesthatwillguidethe
governmentsmanagementofownershipinterestsinprivatefirms.TheseprincipleswillapplytotheU.S.
governmentsequitystakeinGM:
Thegovernmenthasnodesiretoownequitystakesincompaniesanylongerthannecessary,andwillseekto
disposeofitsownershipinterestsassoonaspracticable.Ourgoalistopromotestrongandviablecompaniesthat
canquicklybeprofitableandcontributetoeconomicgrowthandjobswithoutgovernmentinvolvement.
InexceptionalcaseswheretheU.S.governmentfeelsitisnecessarytorespondtoacompanysrequestfor
substantialassistance,thegovernmentwillreservetherighttosetupfrontconditionstoprotecttaxpayers,promote
financialstabilityandencouragegrowth.Whennecessary,theseconditionsmayincluderestructuringssimilarto
thatnowunderwayatGMaswellaschangestoensureastrongboardofdirectorsthatselectsmanagementwith
asoundlongtermvisiontorestoretheircompaniestoprofitabilityandtoendtheneedforgovernmentsupportas
quicklyasispracticallyfeasible.
Afteranyupfrontconditionsareinplace,thegovernmentwillprotectthetaxpayersinvestmentbymanagingits
ownershipstakeinahandsoff,commercialmanner.Thegovernmentwillnotinterferewithorexertcontrolover
daytodaycompanyoperations.Nogovernmentemployeeswillserveontheboardsorbeemployedbythese
companies.
Asacommonshareholder,thegovernmentwillonlyvoteoncoregovernanceissues,includingtheselectionofa
companysboardofdirectorsandmajorcorporateeventsortransactions.Whileprotectingtaxpayerresources,
thegovernmentintendstobeextremelydisciplinedastohowitintendstouseeventheselimitedrights.
Warrantees:
GMwillcontinuetohonorconsumerwarranties.Thispastweek,theU.S.TreasurymadeavailabletheWarranty
SupportProgramtoGMand$361millionwasfundedtoaspecialvehicleavailabletoprovideabackstoponthe
orderlypaymentofwarrantiesforcarssoldduringthisrestructuringperiod.
TheBankruptcyProcess
Duringthisprocess,GMwillcontinueoperatingintheordinarycourse.Fromanoperatingperspective,theday
afterthefilingwillnotbemateriallydifferentfromthedaybeforethefiling.Thefollowingpartieswillbetreatedas
describedbelow:
Employees:Employeeswillgetpaidintheordinarycourse,includingsalary,wagesandordinarybenefits.
Assumingthesalemovesforwardasexpected,PensionPlanandVEBAfundingwillbetransferredtoNewGM.
Suppliers:GMwillseekauthorityatits"firstday"hearingtocontinuetopaysuppliersintheordinarycourse.In
addition,theU.S.TreasurysSupplierSupportProgramwillcontinuetooperate,andGMsuppliersbenefitingfrom
theprogramwillcontinuetoreceivethatsupport.

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Dealers:GMwillseekauthorityatits"firstday"hearingtohonoritscustomerwarrantiesintheordinarycourse.
Moreover,GMwillseektocontinuetohonoritsdealerincentivesforthosedealerswhoareexpectedtocontinue
tobepartofGMsdistributionnetworkgoingforward.TherearesomedealersthatGMhasidentifiedthatwillnot
continuewithGM.Itisexpectedthattheterminateddealerswillbeofferedanagreementtoorderlywinddown
theiroperationsoverthenext18months
UAW:ThemodifiedlaboragreementreachedbetweentheUAWandGMwillbeoperativeandwillbeassumed
bytheNewGM.

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